3. INTELLECTUAL PROPERTY LITIGATION (INCOME) EXPENSE, NET

In May 2014, the Company entered into an agreement with Medtronic, Inc. and its affiliates ("Medtronic") to settle all outstanding patent litigation between the companies, including all cases related to transcatheter heart valves. Pursuant to the agreement, all pending cases or appeals in courts and patent offices worldwide have been dismissed, and the parties will not litigate patent disputes with each other in the field of transcatheter valves for the eight-year term of the agreement. Under the terms of a patent cross-license that is part of the agreement, Medtronic made a one-time, upfront payment to the Company in the amount of $750.0 million. In addition, Medtronic will pay the Company quarterly license royalty payments through April 2022. For sales in the United States, the royalty payments will be based on a percentage of Medtronic's sales of transcatheter aortic valves, subject to a minimum annual payment of $40.0 million and a maximum annual payment of $60.0 million. A separate royalty payment will be calculated based on sales of Medtronic transcatheter aortic valves manufactured in the United States but sold elsewhere. For further information, see Note 13.

The Company accounted for the settlement agreement as a multiple-element arrangement and allocated the total consideration to the identifiable elements based upon their relative fair value. The consideration assigned to each element was as follows:


Past damages	$	754.3
License agreement		238.0
Covenant not to sue		77.7


Total	$	1,070.0

The Company recognized the upfront payment of $750.0 million in "Intellectual Property Litigation (Income) Expense, net" during the second quarter of 2014. The accounting guidance limits the amount to be recognized upfront to the amount of cash received. Therefore, the remaining fair value associated with the past damages element, and the amounts assigned to the license agreement and covenant not to sue, will be recognized in "Net Sales" over the term of the license agreement as delivery occurs since the Company considers the future royalties to be part of its revenue-earning activities that constitute its ongoing major or central operations.

The Company incurred external legal costs related to intellectual property litigation of $2.6 million and $5.5 million for the three months ended June 30, 2014 and 2013, respectively, and $8.1 million and $11.0 million for the six months ended June 30, 2014 and 2013, respectively.

In February 2013, the Company received $83.6 million from Medtronic in satisfaction of the initial April 2010 jury award of damages for infringement of the United States Andersen transcatheter heart valve patent, including accrued interest.